Can your business afford to lose $1.13 million? That was the average cost of employee theft for U.S. businesses in 2016. Small and mid-size businesses accounted for more than half of employee theft cases (68%), with a median loss of $289,864.
Keep in mind that these losses do not account for stolen time, damage to the company’s reputation and harm to employee morale.
There’s no surefire way to prevent employee theft, but there are steps you can take to reduce the risk. Background checks have long been a first defense against embezzlement.
How Do Background Checks Reduce Employee Theft?
Background checks can provide you with a wealth of information about applicants, which can help you make smarter hiring decisions.
What kind of information can a background check tell you?
In the fight against employee theft, having knowledge about an applicant’s criminal history is crucial.
Along with preventing employee theft, relevant criminal background information can help prevent negligent hiring claims. If you hire an employee with a criminal history and that employee is accused of further wrongdoing, you may be facing negligence claims.
A criminal background check will show offenses at the county, state and federal level, including:
Current pending charges
Depending on the background check service, you may be provided with more information related to the person’s criminal background.
Background checks typically include information on the applicant’s credit report. The credit report portion may include the following:
Public records, such as bankruptcies
Tradelines, which can include mortgages, auto loans, credit cards, etc.
Credit reports can be used to verify identities, but they can also reveal potential warning signs, particularly if an employee will be in charge of handling money. For example, high debt levels or signs of excessive spending may be an indication of financial irresponsibility.
Some in-depth background checks include employment history records. This report will include information on all positions held, which makes it easier to find any discrepancies in an applicant’s resume.
In some cases, employment history information will include the salaries associated with each position.
Taking Additional Steps to Prevent Employee Theft
Background checks are a start, but it’s important to take other steps to further reduce the risk of employee theft.
Clear Anti-Theft Policies
It’s important to have clear anti-theft policies in place, and employees need to be well aware of these policies.
Employees should know what they can and cannot do in the workplace. For example, if an employee is using the company copier to print fliers for their garage sale, would that be considered theft of resources? If a member of staff borrows a piece of equipment for the weekend for personal use, is that considered theft?
It’s important to be clear about what your company considers to be theft. Employees cannot follow the rules if they don’t know what they are.
Internal surveillance can be an effective way to prevent theft, but it can also help ensure you have evidence of wrongdoing if an employee does engage in fraud.
Computer monitoring and video surveillance can help catch employees who break the rules.
By law, you must inform employees that they are being monitored. The company should also have a clear monitoring policy in place.